Black Book Market Insights – 12/6/2022

Wholesale Prices, Week Ending December 3rd

After the slowdown in depreciation during the week of Thanksgiving, the depreciation picked up the pace once again last week, but the overall market did not experience the level of declines seen before the holiday. The level of decline last week was more on par with what is typically expected for this time of year.

                                        This Week         Last Week          2017-2019 Average (Same Week)

Car segments                       -0.87%            -0.57%                  -0.80%

Truck & SUV segments      -0.65%             -0.61%                 -0.82%

Market                                 -0.72%             -0.60%                 -0.82%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.87%. For reference, the previous week, cars decreased by -0.57%.

• All nine Car segments decreased last week, with three of the nine reporting declines greater than 1% (Sub-Compact Car, -1.09%; Full-Size Car, -1.08%; Mid-Size Car, -1.02%).

• The Premium Sporty Car segment has reported the smallest declines each of the past eight weeks and last week was no different with a decline of -0.46%.

• Sub-Compact Car has been slower to report declines, but the rate of declines has accelerated over the last six weeks, with the segment now averaging a fall of -1.62% per week (compared with the prior six weeks that averaged -0.60%).

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.65%, compared with the prior week’s decline of -0.61%.

• All thirteen Truck segments reported declines last week, but none reported a decline over 1%. This is only the second time in the last sixteen weeks that Truck segment declines remained under 1%.

• Sub-Compact Crossover reported the largest decline last week, at -0.89%. The segment has averaged -1.32% per week over the last six weeks.

• In contrast, the Full-Size Van segment has averaged a weekly decline of -0.15% over the last six weeks.

Weekly Wholesale Index

Calendar year 2020 and 2021 ended with used wholesale prices at elevated levels. With economic patterns (including the automotive market) driven by the pandemic, normal seasonal patterns (e.g., 2019 calendar year) in the wholesale market were not observed for most of the last two years. We saw a similar picture in 2009, at the end of the Great Recession. Calendar year 2021 did not have typical seasonality patterns as the market had rapid increases in wholesale values for the majority of the year. The Wholesale Weekly Price Index reached the highest point of the year at the end of December 2021, reporting over 1.51 points.

The graph below looks at trends in wholesale prices of 2-6-year-old vehicles, indexed to the first week of the year. The index is computed keeping the average age of the mix constant to identify market movements.

Retail (Used and New) Insights

• General Motors announced plans to launch a sub-brand using the “Corvette” name. The new brand will include a four-door coupe and a high-performance sporty crossover, in addition to the already announced Corvette EV.

• Of the OEMs that report monthly sales figures, the majority reported increases in sales for the month of November, with Subaru (+51.7%) Hyundai/Kia (32.1%) and Mazda (30.6%) experiencing the largest improvements over November 2021.

• Buick is launching another Crossover in the US market next year, this time in the form of a Compact Crossover called Envista. The vehicle is already available in China but is slated to arrive in the US in the second half of 2023.

• Honda is not giving up on hydrogen as an alternative fuel source to gas; the manufacturer has now announced plans to build a hydrogen-powered version of the CR-V in 2024.

Used Retail Prices

Used Retail Prices are more accessible than in years past, due to the proliferation of ‘no-haggle pricing’ for used-vehicle retailing. Transparent pricing upfront makes the car buying process more enjoyable for customers and allows Black Book to accurately measure retail market trends.

At the on-set of the pandemic, in CY2020, used retail prices increased slightly, following typical seasonal patterns, and then began dropping in April, finally hitting a low point in the late spring months. By late summer of CY2020, Used Retail Prices increased as supply of new vehicle inventory started to become scarce, but retail demand slowed down at the end of CY2020, resulting in declining retail asking prices for the last several weeks of the year. When CY2021 kicked off, demand rebounded while retail prices lagged slightly behind wholesale prices; March of 2021 started the dramatic increases in Used Retail Prices, fueled by stimulus payments, tax season, and shortages of new inventory. During the third quarter, retail prices continued to rise at a slower rate but soon picked up the pace once again to start the fourth quarter. In Q4, prices on retail listings steadily increased week after week. As CY2021 came to an end, the retail listing price index closed 36% above where the year began.

The index has remained relatively stagnant through most of CY2022. Now, in the fourth quarter of 2022, the Retail Listings Price Index has started to decline, but not as steep as the wholesale price index.

This analysis is based on approximately two million vehicles listed for sale on U.S. dealer lots. The graph below looks at 2-6-year-old vehicles. The Index is computed keeping the average age of the mix constant to identify market movements.

Inventory

Used Retail

Used retail active listing volume dropped to 1.13 this week.

The Used Retail Days-to-Turn estimate is just over 45 days.

Wholesale

Auction lanes showed increased activity this week, but are still slower than normal overall. Buyer count was consistent with prior weeks, and they were hoping to be able to negotiate. Some buyers were physically in the lanes, but most were online. Sales rates seem to be down this week. There are still some “If” sales coming through so some sellers are willing to negotiate for the right price. Inventory count is overall still down, but consistent, which might be why some sellers are not willing to negotiate. After a short absence, rental companies came back this week strong in the lanes. Large independent dealers and rental companies were very competitive with each other, while it seemed like the smaller franchise dealers stepped back a bit this week. There are still very few Model Year 2023 vehicles coming through the lanes, but we anticipate seeing more in the near future. Overall, wholesale values are continuing to decline. We do not expect much to change for the rest of the year.

The Estimated Average Weekly Sales Rate continues to drop, hitting 49% last week.